Interested in stocks that may have some upside to price in?
For ideas, we ran a screen on highly shorted stocks for those trading at significant discounts to their Graham Number.
This number was created by the "godfather of value investing" Benjamin Graham, and calculates a stock's maximum fair value based off of its EPS and book value per share (BVPS). Stocks trading below their Graham Number may be undervalued.
Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.
Do you think these stocks will see some short covering? Use this list as a starting point for your own analysis.
List sorted by potential upside implied by Graham number.
1. hhgregg, Inc. (HGG): Operates as a specialty retailer of consumer electronics, home appliances, and related services. Market cap of $388.18M. Short float at 29.73%. TTM Diluted EPS at $1.17, MRQ Book Value Per Share at $7.83, Graham number at $14.36 (vs. current price at $10.88, implies a potential upside of 31.96%). The stock is a short squeeze candidate, with a short float at 29.73% (equivalent to 14.8 days of average volume). The stock has performed poorly over the last month, losing 25.09%.
2. DreamWorks Animation SKG Inc. (DWA): Engages in the development, production, and exploitation of animated feature films and characters worldwide. Market cap of $1.56B. Short float at 25.18%. TTM Diluted EPS at $1.74, MRQ Book Value Per Share at $15.93, Graham number at $24.97 (vs. current price at $19.53, implies a potential upside of 27.87%). The stock is a short squeeze candidate, with a short float at 25.18% (equivalent to 17.93 days of average volume). The stock has lost 35.12% over the last year.
3. STEC, Inc. (STEC): Designs, manufactures, and markets enterprise-class flash solid-state drives for use in high-performance storage and server systems. Market cap of $444.46M. Short float at 20.49%. TTM Diluted EPS at $0.89, MRQ Book Value Per Share at $6.80, Graham number at $11.67 (vs. current price at $10.00, implies a potential upside of 16.69%). The stock is a short squeeze candidate, with a short float at 20.49% (equivalent to 7.06 days of average volume). The stock has lost 55.32% over the last year.
*BVPS and EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.